Femtocells: New Kid on the Block for Dual-Mode Services

All week, a new report out from ABI Research about femtocell technology has been burning a hole in my pocket. Friday has arrived, so it’s time to comment or throw this into the “never got to it” pile.

In the report, ABI predicts that, by 2011, annual worldwide shipments of femtocell products will reach 19 million units. The research firm predicts that “Initial offerings are likely to be simple affairs that rely on Ethernet connections to existing ADSL gateways.”

I’ve noticed that there’s been a fair amount of commentary recently regarding femtocells, but I have to admit that I’ve been a bit sketchy on just exactly what the technology does and why it’s significant. To hopefully offer a bit of perspective on the topic, this morning I did some looking around to become better educated.

The first thing I discovered is just how new femtocell technology is—it doesn’t even have its own Wikipedia entry yet. I also wasn’t able to find any definitions for the technology using Google’s “define:” search (define:femtocell).

Therefore, I returned to ABI to learn more. In a report published August 23 (which I referenced in a September 21 article about dual-mode handsets), the research firm described femtocells as “small cellular base stations designed for use in residential or corporate environments.”

ABI predicted that—attracted by the lure of improved network efficiency, reduced churn, and better in-building wireless coverage—operators wanting to roll out triple play/dual-mode services will begin adopting the new technology in droves.

Specfically, ABI predicted that “by 2011 there will be 102 million users of femtocell products on 32 million access points worldwide.”

In the Aug. 23 report, ABI analyst Stuart Carlaw said that, beyond the benefits mentioned above, femtocells also “can form the basis of a viable option for realizing converged fixed-mobile services. They give operators a cost-effective way to support fixed-mobile substitution, as well as a platform in the home upon which additional features such as Wi-Fi and IPTV can be layered.”

In the latest report I mentioned at the start of this blog entry, ABI said that it’s research into femtocells indicate that when it comes to triple play/dual-mode implementations, the “holy grail” is a deployment that incorporates “a Wi-Fi access point, an integrated ADSL gateway and an IPTV set-top box.”

So it sounds as if femtocells, beyond being a technology that can enable dual-mode services, also have the added benefit of allowing providers to more cheaply add other types of services—such as IPTV—to create triple play/quad play bundles.

And, when it comes to multi-play bundles, one of the main attractions for operators is the ability to cut down on customer churn and increase revenues. After all, if an operator offers a variety of quality services (emphasis on quality here), it may be able to get a customer not only to stick around, but to purchase all of those services to cut down on the cost of each and only have to deal with a single bill.

T-Mobile, Liu noted, “one of the first operators to harness the power of WiFi.” It’s HotSpot service is a keystone of the company’s wireless broadband strategy. One problem, though, has been the spotty nature of WiFi service, which Liu said has lessened its impact.

Liu said that T-Mobile’s plans to deploy dual-mode services may include not only UMA technology but femtocells as well, since they enable “more comprehensive coverage at the far edge of the network.”

Liu quoted Current Analysis analyst Peter Jarich as saying, “One of the major reasons for people to switch is poor coverage. Why would I switch if Femtocell technology is enhancing coverage? I'm probably not going to switch.”

Based on all this, I’m going put forward my own definition for femtocells: small cellular base stations that provide enhanced coverage at the far edge of the network.